Infuse Ventures, India’s first cleantech focused early stage fund, is betting on scaling existing technologies in India’s alternative energy space, ones that specifically focus on enabling its use in SMBs. In this interview, the founder, Shyam Menon talks about the fund’s investment and operating strategy.
For Shyam Menon, the decision to turn investor came along the way than something that he worked towards. A Material Sciences graduate, he initially worked with startups in the nanotechnology and fuel cells space, before moving to the research and policy segment. He worked as a carbon finance consultant at the World Bank, and then became an investment manager at Conduit Ventures and later Nadathur Holdings.
“It was during my stint at Nadathur Holdings that I thought, why am I imparting my expertise in a (European) market where the technology is already strong and the environment focus is high? Why not implement it in India, which needs alternative energy, the most?” It was this question and the eventual search that led him to a chance meeting with Kunal Upadhyay, who was already building the core of Infuse Ventures. “He was working out of IIM Ahmedabad’s Centre for Innovation and Entrepreneurship (CIIE), and was already in talks with the Ministries and VCs. I moved back to India in 2012, raised the remaining funds and we officially launched the firm later that year,” he states.
Being the first clean-technology focused fund in India, an interesting feature about the fund is, the investors only seek to invest in companies which operate in areas they carry due expertise in. A plausible reason to follow that strategy could be the model itself, wherein the firm specifically focuses on seed stage investments amounting from Rs. 1 crore to Rs. 11 crore, and works with businesses right from the idea stage (if needed). “It was a deliberate decision to invest in low capex, innovation-led business models because there are already existing technologies in the solar, water and waste space which haven’t been deployed in a big way. Hence, instead of funding fancy new technology, we asked ourselves, why can’t we find out why these existing technologies haven’t been deployed and help them scale?” he recalls.
“It was a deliberate decision to invest in low capex, innovation-led business models because there are already existing technologies in the solar, water and waste space which haven’t been deployed in a big way. Hence, instead of funding fancy new technology, we asked ourselves, why can’t we find out why these existing technologies haven’t been deployed and help them scale?”
Infuse Ventures typically focuses on businesses in the renewable energy, energy efficiency, water and waste management, distributed energy, sustainable agriculture and transport, green buildings and green IT and Cleanweb space. Till date, it has funded close to twelve companies, some of which include Ecolibrium Energy (Energy Management), Revive Electronic Waste (Electronic Waste Management), Surya Power Magic (Solar-based irrigation solutions), and Karma Recycling (reconditioning and reuse of smartphones, tablets and laptops).
In this story, Menon delves deeper into the fund’s investment strategy, the future of alternative energy in India, and the fund’s business model pivot in the next five years.
(As narrated in first person)
A Focused Approach
On one hand, there are companies such as Honeywell and Schneider Electric which offer premium alterative energy solutions more suitable for the multinationals and large companies. What about the small and medium business? Are there cheaper models (solutions) which can suit their requirements? If so, why haven’t they been deployed? These were some questions we asked ourselves, which helped us design a focused investment approach. Take for instance one of our first portfolio companies, Ecolibrium Energy. We worked with them to first identify the ongoing energy consumption of an equipment SMBs use in their factory, ways to control and optimize that, and then we went on to develop more affordable, functional solutions that they could adopt. In other words, we helped them deploy solutions which were specifically designed to deal with Indian realities.
In another instance, when we funded Surya Power Magic, a company which develops solar-based irrigation solutions, we noted that, although solar water pumps were not a new concept, the sales for it in the market was low. The reason being, there were several intermediaries involved in the buying process, such as the bank, subsidies, delivery and more. And, the farmer was just not in a position to fulfill these requirements because a day off from work would mean a loss of one day’s wages. Hence, we went ahead to work on the financial structuring of the deal, and have the pump purchased and delivered to a farmer.
Such examples show that our entrepreneurs haven’t developed something radically disruptive as compared to the rest of the world. Instead, they have set out to solve a problem that is specific to the country, and enable wider adoption of it.
The Identification Process
We attract 60 per cent to 70 per cent of our investment deals through partnerships such as the Economic Times Power of Ideas program, which last year witnessed participation from 25,000 startups, 20 of which CIIE has invested in. Apart from this, we also run a two-month incubation program called Powerstart aimed at Indian Cleantech startups. Until now, we’ve held this program for water management startups in Jaipur, agri-focussed startups in Hyderabad and more. Upon completion, these startups receive a seed investment of Rs. 25 lakh from Infuse Ventures.
The Need for Patient Capital
The words, it is a marathon and not a sprint, hold very true in cleantech. When you invest in cleantech, it’s not a regular marathon but a cross country you’re running so you better be ready for the long haul. Having said that, even within cleantech, there are startups which fall within the intersection of cleantech and IT, ones that can scale up quicker as compared to traditional cleantech companies. Hence, you can’t broad brush paint it. The engagement and investment period will be different for different models within the sector itself.
Cleantech in India: A Futuristic Perspective
In a way, each product or solution developed in the cleantech space (be it water, waste management or solar) is going to be critical and the need for it is only going to rise in the coming years. Hence, I believe, the need of the hour is to identify the right financing mechanism to incentivise companies in this space. The sector needs more soft money led initiatives to build technologies and follow it with equity funding at a later stage.